Chapter 131 - H.O. Hirt In His Own Words: A Collection of Letters, Articles and Speeches
Today’s Chapter is based on the book “H.O. Hirt In His Own Words: A Collection of Letters, Articles and Speeches” by Henry Orth Hirt.
Henry Orth Hirt was a businessman best known as the co-founder of Erie Insurance in 1925. Initially teacher, he transitioned into insurance sales and, along with his partner O.G. Crawford, established Erie Insurance as a mutual insurance exchange focused on customer service. Hirt served as president and CEO for several decades, emphasizing fairness and loyalty to policyholders.
Here’s What I Learned:
Service Above All
"Courteous treatment will make a customer a walking advertisement."
— James Cash Penney
H.O. Hirt’s business philosophy could be summarized in one word: service. For him, service was not a buzzword or a marketing ploy but the very essence of the insurance industry and the foundation of Erie Insurance’s success. He believed that exceptional service was the most effective way to build trust, loyalty, and a sustainable business. This commitment to service was not just about meeting expectations but exceeding them, ensuring that policyholders felt valued and supported, especially in their moments of greatest need.
In fact, Hirt had high principles in mind when he founded the company: “To provide its policyholders with as near perfect protection, as near perfect service, as is humanly possible, and to do so at the lowest possible cost.” As such, it was primordial for Hirt that Erie Insurance’s employees be ready to provide instant service to the policyholders, “no matter how far they may travel, and whether by day or by night.”
“The insurance industry is nothing if it is not a service industry. Therefore, anyone who is allergic to service and avoids giving service that common sense says should be rendered, should get out of the insurance industry ‘on the double’, that is, if you don’t understand the expression, extremely quick!”
— Henry Orth Hirt
To Hirt, providing excellent services to the customers wasn’t simply the company’s motto but it was also Erie Insurance’s best form of advertising. Hirt explains that “there is an excellent method of advertising which really does help an Agent sell his Prospect and keep his Policyholder sold for many years to come. This form of advertising costs nothing and the results are absolutely sure. Every one of you can dish out just as much of it as you please without even consulting the Home Office. Of course, much of it must come from this Home Office or its Branch Office. We are referring to that SERVICE in which the ERIE is above all, and about which we have been shouting since the day we were born.”
As a matter of fact, Hirt understood that the best marketing was a consistently satisfied customer. As such, he saw service as the ultimate competitive advantage and had a disdain for other competitors who spent policyholder money on advertising instead of investing in providing excellent services to the customers. He once said, "We believe that the best form of advertising was a satisfied customer, and therefore, except only in the city of Erie, the ERIE has never spent one nickel of its Policyholders' money on advertising. And yet, we do, year after year, grow a considerably larger percentage than the insurance industry as a whole."
"If every Man, Woman and Child in this ERIE Family, whether a Clerk or Agent, Accountant or Adjuster, Underwriter or Boss, would do all in his power to put the ERIE above all in SERVICE and keep it there, the ERIE and its Children would never need to fear a Depression, because our fame would spread so far and fast that New Business would always be easy to get and would always far exceed our lapses, no matter how tough the times might be."
— Henry Orth Hirt
This reminds me of what we have learned from Isadore Sharp, the founder of Four Seasons who understood that his company’s unique value proposition would be its outstanding services. To do so, Sharp had to think in the perspective of what customers want. He explains that “In building our first hotel, I had been concentrating on customers: What would our customers want most? I had little hotel experience but enough to know what most people wanted: a quiet room, a good night’s sleep, and an invigorating morning shower.”
As such, Sharp built Four Seasons with the intention of providing the best hotel amenities to provide beauty and comfort. And more importantly, he understood that it was well worth to spend more in order to meet with customers’ expectations by providing exceptional services, even if it meant cutting his profits short in the short-term. He believed that profit should not be a guide for a business decision but merely a confirmation of its result.
“Not all my senior people agreed with all these decisions on quality. “Why don’t you use vinyl instead of leather?” they asked. “Polyester instead of silk? Most people can’t tell the difference.” “A lot of the people we hope will become customers can,” I told them. “They’re wealthy. Discerning. They know quality. And quality to them is value.” Well, they thought I was either wasting money or didn’t care about profit.“ — Isadore Sharp
“They did not include air conditioning in their plans. “You won’t need it,” they told me. “Once or twice a year in summer, maybe.” “We must have air conditioning,” I said. “The North American traveler expects it.” It was a costly upgrade, but in my view, absolutely necessary. Meeting customers’ expectations was my first rule for success.”
— Isadore Sharp
Power of Thinking
“To think is to achieve. Since time began for human beings, every great endeavor, every outstanding accomplishment has owed its origin to constructive thinking.”
— Thomas J. Watson
One thing that is apparent from reading H.O. Hirt’s writings is how much he deeply valued independent thinking over blind adherence to rules among the employees he hired at Erie Insurance. Indeed, he disliked employees that merely followed instructions, preferring individuals who could analyze, innovate, and understand the bigger picture. As he once said, “There can be no substitute for thinking!!! Neither on the part of Agents, Underwriters nor top brass.”
As a matter of fact, Hirt believed that in order for Erie Insurance to progress, it needed to rely on the intellectual capacity and critical thinking of every employee. He makes a comparison with IBM, mentioning that “Thinking made IBM the greatest corporation in this country!!!! And only equal or better thinking can enable her competitors to compete.”
“Thinking, yes thinking, plus compassion, put the Erie where it is today.”
— Henry Orth Hirt
Similarly, Hirt believed in unconventional thinking and did not like set rules. As he mentioned, “Don’t let unthinking rules tear it down!!!! Rules are for infants, incompetents, incarcerated criminals and imbeciles—none of whom should have any place in the Erie family.”
Hirt once said, “We tell them constantly we can hire people at $50 a week to follow rules, but what we want are people who can THINK—people who can observe the whole picture and not get excited about one little fragment about that picture."
This is eerily similar to Elon Musk’s principle of questioning every requirement. As we have learned from Musk, first-principles thinking is a great way of reverse engineering a complicated problem. By breaking down the complicated problem into basic components, it will become much easier to find creative ways of solving the issue at hand.
Musk, when faced against a complex problem, always tried to reframe it by using first-principles thinking. His work at Space X is a great example of this. Considering that rockets are absurdly expensive, Musk knew that he had to find a way to build cheaper rockets to send people to Mars. He realized that rockets had a high idiot index, meaning that they were much more costly compared to the cost of its basic materials. A big reason for this is due to regulations. Musk hated it!
In fact, Musk loved to question every requirements, especially when it came from regulators. Rocket components were expensive due to the fact that they are subject to hundreds of specifications and requirements mandated by the military and NASA. Elon Musk would often asks his engineers, both at Tesla and at SpaceX, to always question these “requirements” through first-principle thinking. By doing so, one realises that more often than not, these requirements are not necessary.
As Musk would say, “Step one should be to question the requirements, make them less wrong and dumb, because all requirements are somewhat wrong and dumb. And then delete, delete, delete.”
By questioning requirements and seeing them as mere recommendations, Musk was not only able to save money, but he was also able to make his manufacturing of rockets and cars much more efficient.
“The only rules are the ones dictated by the laws of physics. Everything else is a recommendation.”
— Elon Musk
Elon Musk was so serious about this concept of questioning all requirements that he implemented a five-point checklist that was dubbed “the algorithm”. Here’s a summary of it:
“1. Question every requirement. Each should come with the name of the person who made it. You should never accept that a requirement came from a department, such as from “the legal department” or “the safety department.” You need to know the name of the real person who made that requirement. Then you should question it, no matter how smart that person is. Requirements from smart people are the most dangerous, because people are less likely to question them.Always do so, even if the requirement came from me. Then make the requirements less dumb.
2. Delete any part or process you can. You may have to add them back later. In fact, if you do not end up adding back at least 10% of them, then you didn’t delete enough.
3. Simplify and optimize. This should come after step two. A common mistake is to simplify and optimize a part or a process that should not exist.
4. Accelerate cycle time. Every process can be speeded up. But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted.
5. Automate. That comes last. The big mistake in Nevada and at Fremont was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs were shaken out.”
Golden Rule
"Do unto others as you would have them do unto you.”
— unknown
At the heart of H.O. Hirt’s business philosophy was this belief in ethical conduct and in the principle of treating others as you would wish to be treated. In fact, the Golden Rule wasn’t just a moral guideline for personal life; it was an explicit business strategy that applied to policyholders, claimants, and even competitors. Hirt believed that genuine decency and fairness were not just admirable traits but essential ingredients for enduring success.
Hirt once said, “Success in Business is not a matter of tricks or gimmicks, or even of education and training. It is just a matter of simple common sense, mixed with just plain decency. A man who has sold Himself to more people and influenced more people than any other Soul who has lived on this earth, put it this way: DO UNTO OTHERS AS YOU WOULD HAVE OTHERS DO UNTO YOU.”
This rule was not abstract, it was applied concretely in the daily operations of Erie Insurance. For example, Hirt insisted that his adjusters maintained the highest standards of empathy and fairness towards policyholders even during vulnerable times.
“We told our Adjusters that we still expected them to treat others as they would like to be treated themselves, that there was to be no chiseling. We told them that while the ERIE was losing some money, it did not propose to lose its HONOR.”
— Henry Orth Hirt
This commitment to honor, even in financially challenging times, speaks volumes about the ethical foundation Hirt instilled. He believed that the company's integrity was paramount, even over short-term profits. Furthermore, Hirt championed a reciprocal relationship with policyholders, viewing them not just as customers but as stakeholders. This was evident in Erie's structure as a reciprocal exchange, where policyholders' interests were prioritized.
Hirt explains that “The management of the ERIE, which, as a Reciprocal, is a policyholder's organization, has always been keenly mindful of the fact that its policyholders come first above everything else. And so its profits, or more properly its unused premiums, have always been returned to its policyholders.”
This practice of returning unused premiums reinforced the idea that the company existed for the benefit of its policyholders, fostering trust and loyalty. Hirt's customer-centric approach was holistic, extending to every interaction and decision. He understood that the collective actions of every employee shaped the public image of the entire industry.
“EVERY EMPLOYEE—
EVERY UNDERWRITER
EVERY MANAGER of every rank
EVERY ADJUSTER as well as
EVERY AGENT and his EMPLOYEES
are part of this Insurance Industry, and the PUBLIC IMAGE of our Industry is made up of the Sum TOTAL of all of our ACTS—both GOOD and EVIL; or FAILURES TO ACT as well as every word we utter!”
— Henry Orth Hirt
This importance giving to the Golden Rule reminds me of J.C. Penney, who believed that the relationship between a merchant and a customer was sacred and that a business could only succeed if it served the needs of its customers with honesty and integrity. He embraced the idea that a merchant’s primary responsibility was to act as the representative of the customer in the marketplace.
"There must always be this mutuality of interest between the merchant and the people who buy goods at his store. The first obligation of the retail merchant is to act as the representative of his customers in the markets of the world. It is his business to get the supplies his customers want in the most direct, the swiftest, and most economical line from the reservoirs of modern industrial production into the homes of his people."
— J.C. Penney
Penney’s commitment to customer service went beyond just selling products; it was about ensuring that customers received the best possible value for their money. He believed that a successful business was built on trust and that customers would return if they felt they were being treated fairly and honestly. This philosophy became the foundation of the J.C. Penney Company, as Penney once said, “There are few things I enjoy more than making a good sale, but the second sale to the same customer gives me a thousand times more satisfaction.”
As a matter of fact, Penney realized that the relationship between seller and buyer is reciprocal, hence why he first named his store “The Golden Rule”, based on the famous saying “Do unto others as you would have them do unto you.” As such, Penney understood that every interaction with customers is an opportunity to build lasting relationships rather than merely making sales. As such, he was dedicated to serve customers beyond the normal transactional relationship; he sought to understand their needs deeply. By prioritising customer insights over mere profit margins, Penney established J.C. Penney stores as trusted destinations for shoppers.
“To be the servant of those people who were my friends and my neighbors, to be their representative in the wholesale markets, to prosper as a by-product of enriching them—was not that a thing to live for?”
— J.C. Penney
For J.C. Penney, the Golden Rule became more than just a slogan; it was a guiding principle that informed every aspect of his business, from customer interactions to employee relations. As he once said, “[The Golden Rule Store] was more than a trade name for me. It became a rule to take to heart and to live by.” Penney understood that ethical behavior was not just morally right, but also good for business in the long run.
Beyond the Book
Read "Elon Musk: A Framework for Thinking" by Farnam Street
Read "What is First Principles Thinking?" by Farnam Street
Read "James Cash Penney and the Golden Rule" by Farnam Street
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